Anjelica Finnegan looks at what needs to be considered to make the apprenticeship levy work for charities.

In April 2017, all employers with a pay bill of over £3m will be required to pay the new apprenticeship levy.

The government believes this will significantly increase the quantity (with an expected 3m apprenticeships by 2020) and quality of apprenticeships in England.

The exact details of how the levy will work in practice are still being thrashed out, but what we know so far is that the levy will be set at 0.5 per cent of employers’ pay bill.

Redistribution outside of the charity sector of apprenticeships levy funding could call into question whether money given for public benefit should be allowed to leave the sector

Every employer will receive a £15,000 allowance to offset against payment of the levy.

As an example, if Employer X’s pay bill is £3.2m, the cost of the levy will be £16,000. Employer X will receive £15,000 to offset this cost and so the total payable to the levy is £1,000.

Employers that pay the levy will receive a digital voucher to the value of the amount they have paid. This voucher can then be used to buy training, from an approved trainer, for apprentices. So, Employer X from the above example will receive a £1,000 digital voucher.

Employers will have a fixed amount of time to spend the voucher — this time limit is still to be decided but initial discussions suggest it will be two years.

After this time the money will be redistributed to other organisations, potentially outside of the charity sector.

Initial estimates suggest that around 1,200 charities will be affected by the apprenticeship levy and will cost £70m collectively.

So will the levy work for charities? In a meeting with 35 of CFG’s members last week, it became clear that the levy poses significant and unique challenges to the charity sector.

Perhaps the most significant challenge is that there has been a lack of strategic oversight and investment in apprenticeship programmes across the sector.

It is because the sector is still in recession and facing a £4.6bn funding gap by 2018, as such charities have scaled back on their investment in skills.

Moreover, the sector has not had a skills council in place since 2013, so there has therefore been no strategic oversight of development and quality of apprenticeships, both of which are critical to a successful apprenticeships programme.

The levy should therefore be made available to charities to develop new apprenticeships and recruitment as well as paying for training.

It will help to ensure that they can provide meaningful, high quality apprenticeships, thereby attracting people into the sector.

Secondly, there is the question of how this levy interacts with the principles which underpin the use of charitable resources.

For example, redistribution outside of the charity sector of apprenticeships levy funding could call into question whether money given for public benefit should be allowed to leave the sector in order to subsidise private sector employers and support private benefit.

Neither is it clear that funding given to one charity by a funder or donor should be allowed to leave it in order to subsidise another charity’s operations which was not the donor’s intention?

It is because of these unique challenges, and that the charity sector is a major contributor to the British economy, that we have urged Skills Minister Nick Boles to ensure a representative from the charity sector will sit on the board of the new Institute for Apprenticeships.

From our conversations with the Department for Business, Innovation and Skills, we are confident that this is being considered, but we have not yet been given confirmation that this will happen.

It is vital that someone who understands the charity sector is able to inform and shape the apprenticeship levy to ensure that charities are not just crowbarred into the policy, but actually benefit from it.